Euro and sterling rally after ECB, BOE hold rates

The euro rallied sharply against a broadly weaker US dollar on Thursday, reaching a one month high after the European Central Bank kept interest rates on hold at its monetary policy meeting today. Helping accelerating gains was a speech by ECB president Mario Draghi after the meeting.

EUR/USD hit 1.3188 during late European trading and going into the US session, the pair’s highest since May 8.

The ECB left its benchmark interest rate on hold at a record low 0.5 percent and left deposit rates at zero, giving relief to markets which feared that negative interest rates would be imposed.

Meanwhile, the greenback remained under pressure after US private sector jobs data on Wednesday lowered expectations for a strong economic recovery.

The main risk event for the dollar now is tomorrow’s US nonfarm private employment which is expected to increase by 167,000 from a previous 165,000. Today’s initial jobless claims showed a drop and kept dollar steady.

The pound gained sharply against the dollar to $1.5526 after the Bank of England announced no changes to monetary policy.

The BoE left interest rates on hold at a record low 0.5 percent and kept the size of its asset purchase program unchanged at GBP375 billion at outgoing Governor Mervyn King’s final meeting.

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